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Role of the U.S. Trustee in Bankruptcy Cases



Individual consumers comprise the sweeping majority of bankruptcy debtors. In fact, nearly 70 percent of cases are filed under Chapter 7, and approximately 30 percent of cases are filed pursuant to Chapter 13 by individual debtors in rehabilitation cases with repayment plans. As a result, the U.S. Trustee's Office devotes a significant amount of its resources to the oversight of consumer bankruptcy cases under Chapters 7 and 13.

U.S. Trustee's Role in Chapter 7

The U.S. Trustee is responsible for litigating matters in Chapter 7 bankruptcy cases that impact the bankruptcy system's integrity and impair or otherwise inhibit its protections. For example, the U.S. Trustee may petition the bankruptcy court to deny a consumer debtor the benefit of a discharge as a substantial abuse of the bankruptcy system and in violation of the bankruptcy code. Similarly, the U.S. Trustee may file an objection to the fee application of debtor's counsel because the fees requested are excessive, unsubstantiated, or duplicative. Likewise, the U.S. Trustee's Office prosecutes cases against bankruptcy petition preparers in instances of unlawful conduct in violation of the bankruptcy code.

In addition, the U.S. Trustee appoints panel trustees charged with duties for administration of consumer bankruptcy cases. Panel trustees are assigned to their individual dockets of Chapter 7 consumer bankruptcy cases on a rotation. The panel trustees are usually appointed for one-year terms that are renewable.

Beyond the U.S. Trustee's appointment duties, the U.S. Trustee supervises the panel trustees in their administration of bankruptcy cases. The U.S. Trustee also oversees the financial records maintained by panel trustees and makes certain that panel trustees fulfill their fiduciary duties appropriately and completely.

Rarely in a Chapter 7 case are there any assets of a debtor to administer and sell for the benefit of paying creditors. However, if there is such a unique and fortunate situation, the U.S. Trustee's Office may be the party responsible for selling the debtor's property and then, in turn, paying debtor's creditors from the sales proceeds.

U.S. Trustee's Role in Chapter 13

The U.S. Trustee supervises standing trustees in Chapter 13 cases. Similar to a Chapter 7 situation, the U.S. Trustee is responsible for supervising the standing trustees in their administration of the cases assigned to them. The U.S. Trustee also analyzes the financial picture in a debtor's bankruptcy filings and advises the bankruptcy court of its concerns in a debtor's rehabilitation plan.

Additionally, the U.S. Trustee ensures that the standing trustees fulfill their fiduciary duties. The U.S. Trustee reviews the trustees' financial records, and the standing trustees' reports on their cases, budget reports, bank account statements, court records, statistics, trustee bonds, independent audits of the trustees, compensation for the trustees, expense records, training, trust accounts, and management skills.